Economy grew at weak 1.3% pace in second quarter
Friday's second-quarter figures fell short of expectations and are well below the level of growth needed to bring down the nation's high unemployment rate. Economists had projected that the economy grew at a 1.8% annualized rate in the second quarter.
Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, said the disappointing new data -- combined with the ongoing political stalemate over raising the debt ceiling -- could push the U.S. economy back into recession. Although she noted the chances of that are still low.
"Anemic consumption, still declining state and local government spending, tepid business investment, and soft housing activity all combined to offset some strength in exports," she said. "Concerns about the weak labor market and rising food and energy prices continue to weigh on consumer confidence."
The figures for the nation's gross domestic product in the second quarter came on the heels of a sharp slowdown in the recovery in the first three months of the year. The government initially estimated that the economy grew at an annualized rate of 3.1% in the fourth quarter of 2010, then 1.9% in the first quarter. On Friday those growth rates were revised down to 2.3% and 0.4%, respectively.
Economists had hoped that the slow first-quarter growth was caused by temporary factors, such as rough winter weather in much of the country and a spike in oil prices caused by unrest in the Middle East. But the slowdown continued through the second quarter, with the unemployment rate rising from 8.8% in March to 9.2% in June.
Last month, the Federal Reserve downgraded its earlier estimate of economic growth for the year. The Fed now believes the economy will grow between 2.7% and 2.9%, down from an April estimate of 3.1% to 3.3%.
Friday's economic data followed better than expected jobless numbers on Thursday. New claims for unemployment benefits fell to 398,000 in the latest week, the first time since April that the weekly figure had dropped below 400,000.
-- Jim Puzzanghera
Photo: Shoppers at the Camarillo Premium Outlets in Camarillo this month. Credit: Los Angeles Times.